European shares start 2014 with fresh peaks

LONDON (Reuters) - European stocks edged up in the first session of 2014, hitting fresh peaks following a stellar 2013, but gains were likely to be capped by weak Chinese data and by the absence of many players still on holiday.

Historically, equities have enjoyed gains in early January as investors put on bets for the year ahead, and this time sentiment has been further cheered by the strong gains enjoyed over 2013.

Such flows outweighed the news that China's factory activity slowed in December, which raised concern about the strength of demand in the world's second biggest economy.

"We are going into the year on a little bit of a mixed picture in terms of macro data, but in terms of sentiment it's still strong in equity markets and ...January is normally a very strong month, you always see very strong bids in the market this time of year," said Peter Garnry, equity strategist at Saxo Bank.

"It has been quite an incredible rally and at some point I think we will need to see a correction, but it probably won't be in January."

The FTSEurofirst 300 was up 0.3 percent at 1,320.00 points by 0803 GMT on Thursday, hitting fresh 5-1/2 year highs. The pan-European share index rallied 16.1 percent in 2013 in its best showing in four years thanks to ample liquidity from global central banks and early signs of an economic recovery in Europe.

The German DAX rose 0.6 percent to a fresh record high, breaking above 9,600 points.